Chancellor John Healey announced plans for a British Data Centre Covenant in the UK Budget presented to parliament on 28 October, Reuters reported. The proposed arrangement would give qualifying data centre operators priority electricity-grid connections, and permission to build power generation on their sites where necessary, in exchange for commitments to local communities, jobs and water supplies. Healey linked the plan to keeping sensitive data used by public services and the armed forces in Britain.
Key points
- The planned covenant links priority grid connections to commitments on local investment, employment and water protection.
- Operators could also receive permission for on-site power generation where necessary.
- Healey said the aim was to keep sensitive public-service and military data in Britain.
- The Budget also included funding for the Sovereign AI Unit and an AI Challenge Prize for public services.
British Data Centre Covenant links jobs to grid access
The covenant puts two resources sought by developers — a place in the grid connection queue and, where needed, permission to generate power on site — alongside obligations to invest in local communities, create jobs and protect water supplies. Healey presented the exchange as part of the government’s AI and national-security plans. The announcement concerned a programme the government would launch, rather than a change already operating for data centre applicants.
City AM reported that the grid offer was directed at critical data centres and that permission for on-site generation could allow a facility to operate while awaiting a connection. It also reported opposition to data centre construction over energy use and effects on local communities. The proposed conditions put those local concerns into the same bargain as access to electricity: developers seeking the benefit would have to make commitments concerning the places and water supplies around their facilities.
Healey gave public-service and military uses of AI as the reason for seeking more domestic capacity. In parliament, he said: “When the NHS uses AI to treat patients, we want that data here. When our Armed Forces use AI to keep us safe, we want that data here”. The covenant would offer an infrastructure incentive to operators in pursuit of that objective, with community investment and environmental protection forming the other side of the proposed exchange.
Nscale’s Essex site faces a grid wait
The electricity constraint has a recent example in Essex. Microsoft withdrew as anchor customer for Nscale’s planned £2bn AI data centre at Loughton, AI News reported on 26 October. UK Power Networks had told Nscale that sufficient electricity would not be available until the early-to-mid 2030s. Nscale remained the developer and was exploring other sources of power and a quicker grid connection, according to the report.
AI Affairs previously reported Microsoft’s exit from the Nscale Essex deal. AI News said Microsoft had been expected to help finance a supercomputer at the site, which was planned for AI chips, model training and AI services. The wait described by UK Power Networks extends well beyond the 2026 opening that City AM reported had been planned for the project. Nscale, according to AI News, had cleared the former scaffolding-yard site in preparation for construction.
Peter Griffiths, founder and executive chairman of Argyll Data Development, called electricity the constraint on the UK’s AI plans in comments reported by AI News. He urged faster connections for Scottish AI infrastructure, saying that proposed data centres there were waiting alongside clean-power projects. His comments were an industry argument for changing the queue, made against the background of Microsoft’s withdrawal. Healey’s covenant offers priority to operators that take on the specified local obligations.
£140m for Britain’s Sovereign AI Unit
Healey also announced another £140m for Britain’s Sovereign AI Unit, which would direct government investment towards British AI companies considered strategically important. The funding forms part of the government’s effort to reduce reliance on foreign technology suppliers. City AM reported that Healey confirmed an additional £500m for AI safety and security. In comments reported by AI News on 26 October, Griffiths of Argyll Data Development described £600 million as a down-payment on AI safety and security and said sovereign AI infrastructure would cost billions.
The proposed support for domestic suppliers drew a qualification from Dr Maria Dunford, chief executive of British health technology firm Lifebit. She welcomed the sovereign AI funding but said public procurement continued to favour overseas technology companies. In her view, funding British firms would have limited effect if government contracts in areas including the NHS and defence continued to go to established overseas suppliers. Her objection concerns a decision separate from grid access: which companies public bodies choose when buying AI systems.
Healey also announced an AI Challenge Prize intended to encourage AI use in public services, alongside funding to support workers adapting to technological change, Reuters reported. Those measures were presented in the same Budget as the data centre covenant and the proposed support for domestic AI companies.
